A globally diversified stock ETF portfolio with balanced risk and low costs

Report created on Dec 28, 2024

Risk profile Info

4/7
Balanced
Less risk More risk

Diversification profile Info

4/5
Broadly Diversified
Less diversification More diversification

Positions

The portfolio consists entirely of the Vanguard Total World Stock Index Fund ETF, representing a single asset class: stocks. This ETF provides exposure to a broad range of global equities, offering diversification across various regions and sectors. While this composition ensures simplicity and ease of management, it lacks exposure to other asset classes like bonds or commodities, which could provide additional stability. For a balanced portfolio, consider introducing other asset classes to mitigate risk and enhance diversification.

Growth Info

Historically, the portfolio has achieved a Compound Annual Growth Rate (CAGR) of 10.54%, which is commendable for a stock-focused investment. However, it has also experienced a maximum drawdown of -34.27%, indicating significant volatility during downturns. These figures highlight the potential for strong returns, albeit with notable risk. Investors should weigh this performance against their risk tolerance and consider diversifying to reduce vulnerability to market fluctuations.

Projection Info

The Monte Carlo simulation, using historical data, suggests a range of potential outcomes for the portfolio. With a median projection of 262.92% and an annualized return of 10.75%, the future looks promising. However, the 5th percentile at 17.98% illustrates the inherent uncertainty and risk. While simulations provide valuable insights, they rely on past data and cannot predict future events. Investors should use these projections as one of many tools in decision-making.

Asset classes Info

  • Stocks
    99%
  • Cash
    1%

The portfolio's allocation is heavily skewed towards equities, with over 99% in stocks. This concentration can yield high returns but also increases volatility. Compared to a typical balanced benchmark, which includes a mix of stocks and bonds, this portfolio is more aggressive. Introducing fixed-income assets could balance risk and return, offering a cushion during equity market downturns and providing more stable growth.

Sectors Info

  • Technology
    25%
  • Financials
    16%
  • Industrials
    11%
  • Consumer Discretionary
    11%
  • Health Care
    10%
  • Telecommunications
    8%
  • Consumer Staples
    6%
  • Basic Materials
    4%
  • Energy
    4%
  • Real Estate
    3%
  • Utilities
    3%

Sector allocation is well-diversified, with technology leading at 24.58%, followed by financial services and industrials. This distribution aligns with global benchmarks, indicating a balanced sectoral exposure. However, the technology sector's dominance could lead to higher volatility, especially during regulatory changes or economic shifts. Investors should monitor sector trends and consider rebalancing if one sector becomes overly dominant, potentially increasing risk.

Regions Info

  • North America
    66%
  • Europe Developed
    14%
  • Asia Emerging
    6%
  • Japan
    6%
  • Asia Developed
    4%
  • Australasia
    2%
  • Africa/Middle East
    1%
  • Latin America
    1%

The portfolio is predominantly exposed to North America (65.72%), with notable allocations in Europe and Asia. This geographic spread provides a good balance, aligning with global economic activity. However, emerging markets are underrepresented, which could limit growth opportunities. Increasing exposure to these regions might enhance diversification and capture potential growth, albeit with increased risk. Regularly reviewing geographic allocation ensures alignment with global economic shifts.

Dividends Info

  • Vanguard Total World Stock Index Fund ETF Shares 1.90%
  • Weighted yield (per year) 1.90%

The portfolio has a dividend yield of 1.9%, providing a modest income stream. Dividends can enhance total returns, especially in a low-interest-rate environment. For income-focused investors, this yield might be insufficient, suggesting a need to explore other income-generating assets. However, reinvesting dividends can compound growth over time, aligning well with a long-term wealth-building strategy.

Ongoing product costs Info

  • Vanguard Total World Stock Index Fund ETF Shares 0.07%
  • Weighted costs total (per year) 0.07%

The portfolio's cost structure is impressively low, with a Total Expense Ratio (TER) of 0.07%. Low costs are crucial for maximizing long-term returns, as they minimize the drag on performance. This aligns with best practices for cost-effective investing. Investors should regularly review costs to ensure they remain competitive, but the current structure supports efficient wealth accumulation over time.

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